James Mann, Sr. Vice President/Director
of Ehlers, a public sector financial advisory group.
Ehlers serves as a financial advisor for the Town of Somers
(Photo by Jacqueline Klapproth Nelson)
Joint work session meeting on June 29, 2015 of Somers Village Board, Town Board, Plan Commission, Town Staff, and Town/Village attorney regarding presentation from Ehlers financial advisory group on proposed creation of TIF District No. 1 in the Village of Somers
(Photo by Jacqueline Klapproth Nelson)
James Mann, Sr., Vice President/Director of Ehlers, a public sector financial advisory group, presented information on Tax Incremental Financing Districts (TIF) at a joint work session meeting on June 29, 2015. In attendance were members of the Somers Village and Town Boards, Plan Commission, Town staff, and Town/Village attorney. The proposed First Industrial Realty Trust development prompts the creation of Somers first Tax Incremental District (TIF). Somers officials are proceeding with the process to establish a TIF which will coincide with First Industrial’s plans to begin site preparation in August or September of this year.
First Industrial Realty Trust Proposes Development on the 308-acre Tunkieicz Farm Property
First Industrial is planning to develop a business park on the northeast corner of Highways S and H in the Village of Somers, locally known as the Tunkieicz farm. On Monday, April 13, 2015, the Somers Plan Commission approved a conceptual site plan. Phase I of the project includes two 600,000 square foot buildings. Phase II of the project will be proposed as demand occurs.
Somers Required to Provide Utilities: Need for Development to Proceed
Without sanitary and storm sewer, water, other utilities, and road infrastructure, developers will go elsewhere, taking with them economic benefits the project would create for the community. What benefits will new commercial/industrial development create for Somers and Kenosha County? The installation of all infrastructure (water, sewer, utilities, and roads), construction of a new facility, and site landscape will affect contracts with local vendors who will provide labor, supplies and equipment. Once the new facility is operational, the new business will spend money on payroll, service contracts with local vendors, and purchase supplies, equipment, and goods from local businesses. Additionally, employees who work at the new facility will need housing, transportation, and are expected buy goods and services from local businesses. A new development in Somers is expected to produce an economic “ripple effect” in the Somers and Kenosha County economy.
How a Development Project Will Affect Somers Budget
The Somers Village Board understands that new development projects will lead to a fluctuation in new revenue from taxes, permits and impact/developer fees as well as expenditures relating to public works, fire and rescue, and administration. The Village Board has retained James Mann, Sr. Vice President/Director of Ehlers financial advisors to provide advice and analysis with respect to debt and financial planning relating Somers economic development projects.
Somers Plans to create a TIF (Tax Incremental District) to finance First Industrial Development municipal infrastructure. The process of creating Tax Incremental District Number One, Village of Somers, is outlined in Wisconsin Statutes. There are six basic steps:
2. Joint Review Board is created
3. Public Hearing
4. Village Board approval
5. Joint Review Board approval
6. State of Wisconsin approval
Example: How a TIF works (This is not specific to any Somers project)
For example, at the beginning of the project, the value of the land owned by a TIF District is $1,000,000 and the annual property tax is $40,000. The $40,000 is split between the taxing bodies (Village, County, School District, and Technical College). This tax is credited to the municipality’s general fund. At the time the TIF is created, the taxing bodies know they will continue to receive tax revenue on the $1,000,000 value per year for the life of the TIF, usually around 20 years. The revenue may change based on a higher or lower tax levy but the base value will remain $1,000,000. Once the period of the TIF expires, the taxing bodies are entitled to their full share of the tax revenue from within the TIF.
In the following years two, three, and beyond, as the developer begins to make improvements on the property, it will incrementally increase in value over the base of the $1,000,000. For example, at the end of year two, the property may be valued at $5,000,000. The incremental value over the base, or $4,000,000, is taxed, and the revenues are allocated back to the TIF District, not the general fund. Tax revenues from the incremental value in the TIF are not split between the taxing bodies. Those funds are then used to pay TIF related debt and expenses incurred by the municipality. The goal is to collect revenue on the incremental value in excess of annual debt obligations and expenses incurred by the municipality on behalf of the TIF. One debt example would be the payment on bonds used to finance the infrastructure required up-front such as roads, sanitary and storm sewer, water and other utilities.